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Is a Family Office within reach?

Similar to successful companies, as families grow and prosper, they may find themselves needing more resources to
manage their assets; they may need a family office. New options are making this support available for more families
today.

In 1882, John D. Rockefeller established the first traditional family office to manage his family’s extensive assets
and philanthropic activities. But even if you don’t have the wealth of the Rockefellers, you have likely faced the
challenges of managing multi-generational wealth as your family has grown and prospered.

The question of estate planning is a good example. As children grow up, marry and have children of their own who then
do the same, decisions about how family assets will be passed from generation to generation can become complex and
time-consuming. Likewise, issues surrounding tax preparation, insurance coordination and trust administration may prove
overwhelming.

As the task of managing these diversified issues becomes more complicated, creating a family office can help centralize
and control information, and may prove useful in simplifying investments, philanthropic efforts and other family-centered
responsibilities. While a wide range of family office structures is available, most fulfill five key roles: chief advisor to the family investment manager financial administrator trustee
back office support

Is a Family Office Right for You?
To decide whether to set up a family office, it’s best to first decide on an over-arching goal. For example, some
offices solely focus on investments and growing wealth, often after the sale of a family business or sudden infusion
of liquidity. Other family office directives purposefully exclude investment management, leaving the question of asset
management to a separate group of professionals.

“The first question to ask is, what is the purpose of the family office?” says Charlotte Beyer, founder and CEO of the
Institute of Private Investors (IPI), a networking and education resource to families with substantial assets and their
advisors. “Is it a profit center or a cost center? Is it intended to preserve wealth or to grow it? Is it to educate the
next generation? Once you decide on the purpose of the family office, that drives the decisions and makes for a sounder
strategy.”

Jon Carroll, co-founder and managing director of New York-based Family Office Metrics, a strategic business consultancy
to family fiduciaries, points to ways in which a family office can increase a feeling of security for those families
that choose to employ one.

“A family office is the right choice when the family wants absolute control over its own affairs,” Carroll says.
“Along with absolute control comes privacy and confidentiality.”

Family offices can also become a central source of information about the family’s financial matters and allow for
continuity from generation to generation while acting in accordance with a set of family values.

Because they can cost more than $1 million to run each year, most experts believe that to justify the economies of
scale, family offices are best suited for families with a net worth of at least $100 million to $150 million.
Increasingly, however, more families are finding ways to enjoy the benefits of a family office structure – even if
the cost of a stand-alone family office proves prohibitive.

Multi-Family Offices Offer Power in Numbers
Families for whom a stand-alone family office is unnecessary may benefit from joining a multi-family office.
Multi-family offices evolved out of more traditional, one-family offices and are designed to serve more than a
single family at a time. These families often share common needs and values while seeking the same kinds of services
single-family offices can provide.

According to the Family Office Exchange, a professional organization that tracks information on family offices, there
are approximately 50 multi-family offices in the United States. And while structures for these offices vary, they
often follow one of the following models for their organization and operation: Long-established family offices that, to remain
intact, offer their services to additional investors to attract the most qualified
professionals and increase the assets the office manages. Long-established family offices that have
chartered private trust companies to handle their family trust needs and those of other families. Family groups that have developed global
investment expertise to serve their needs and those of other investors. Family groups that turned ownership of a family
office over to a management team but remained satisfied clients of the office.

While multi-family offices may offer a slightly different level of personalized service than a stand-alone office can
provide, a key client contact is typically assigned to each family. This “quarterback” is responsible for ensuring the
multi-family office meets the family’s needs.

Leveraging the Power of Cyberspace
For other families, a technology-based virtual family office solution may be the answer. A virtual family office allows
many asset management and family office professionals to collaborate through the Internet or other emerging technologies,
and can help grow and protect family wealth in cost efficient ways by reducing or eliminating the need for a traditional
bricks-and-mortar office.

At the core of a virtual family office is the ability to leverage the power of technology in such areas as data
aggregation and management, online collaboration and Web portals that can collect all of a family’s services and
information in one, easily accessible location. While they may lack the more personable elements of a more traditional
relationship-based family office, virtual family offices can provide many of the same types of service while providing
an expanded level of access to information and a more “hands-on” feel due to their Web-based features. For many first
generation millionaires and younger families who are more comfortable with technology and who find the cost of traditional
or multi-family offices unaffordable, a virtual family office can be attractive.

Selecting the Best Option
“With so many options available, finding someone who can engage you in an effective conversation about your needs is
important,” says Steve Bell, senior vice president and head of the Wealth Management Group at Northern Trust, which
works with more than 330 families around the globe. “We sit down with clients and ask them what they need, and help
them answer questions such as, ‘Do I need a family office? What functions would it have and how would I structure it?’”
These answers can help you determine what type of solution will best suit your family’s needs.

“We take on many of the so-called back office services for our clients – coordinating the reporting on their various
trust and investment accounts, and handling financial and tax planning, investment compliance, budgeting, asset
reporting and accounting. This allows them to focus on things that are more important to them.”

Gain Depth of Support
Carroll likens the decision to outsource family support functions – whether to a traditional, multi- or virtual-family
office – to having a deep bench on a sporting team. “There is a lot of expertise at these families’ disposal” when
they use a family office, Carroll says. “A multi-generational and multi-disciplinary approach to the relationship is
the one that provides the family with the highest value.”